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The crowd-source king

Tuesday, 1 March 2011 | By Oliver Milman

Mark Harbottle happily admits he’s a “start-up guy”. The co-founder of SitePoint and 99Designs may not be steeped in the pinstripe and spreadsheet CEO culture, but he can be relied upon to come up with a sector-defining online idea.

“It’s all about the journey rather than the destination for me – I never knew where SitePoint or 99 would end up,” he says.

“I’m all about starting businesses. From an early age, all I wanted to do was get out there and start a business. I’m perhaps not the best finisher, which is why I need CEOs to take the businesses to the next level.”

The casual observer would probably consider 99Designs to be Harbottle’s crowning achievement. The crowd-sourcing creative design website has a revenue touching $20 million a year, has 65,000 design projects on the go and has so far facilitated the payment of more than $17 million to nearly 100,000 designers.

These are mind-boggling numbers for a site that was only launched in 2008. But the launch of 99Designs, along with internet luminaries Lachlan Donald, Paul Annesley and Leni Mayo, is just the latest stop in an entrepreneurial journey by Harbottle that has consistently put the customer centrestage.

Uncovering online potential

Upon completing his computer science course at university in 1994, Harbottle started work at Sausage Software, a Melbourne-based firm that created the world’s first web authoring tool.

“The internet was new to me and I was amazed at the way it took off – we were helping people build websites but all we were doing was selling ones and zeros across cables, nothing actually physical,” he recalls.

“That really opened my eyes to the potential of the internet. I was lucky in a way because my friends were working at banks or airlines. I got a good understanding of what customers wanted.”

While working on various advertising deals, a site offering content for budding webmasters caught Harbottle’s eye. The site was run by Matt Mickiewicz, a Canadian who was in Year 10. Harbottle, who was looking to move on from Sausage, decided to go into 50/50 partnership with Mickiewicz to launch ad-funded tech resource SitePoint.

“I was 26 and he was 16 (but) age didn’t come into it,” Harbottle says. “I saw that he was a smart kid that knew what he was doing. He was making a few thousand dollars a week through his site. Matt put in a few thousand dollars to fund it and I put in $400.”

Faced by a severe downturn in ad dollars during the dotcom crash, Harbottle and Mickiewicz came up with the idea of providing high-quality content to web developers in print form.

“Our customers were printing information off the web, so we thought, let’s do something here,” Harbottle says. “The idea was spawned through that. You could call it crowd-sourcing, in a way. It was about working out what the customers wanted and responding to that.”

“We printed an on-demand book and it went gangbusters. We have about 60 books now.”

A crowd-sourced idea

SitePoint may have altered its business model to become a traditional publisher, but it was its continued online innovation that was to spark the launch of 99Designs.

The large community of developers and designers that gathered online at SitePoint’s forum regularly played what Harbottle calls “Photoshop tennis” in working on logos.

The dynamic changed when a small business owner asked the community to create branding for him. Regular competitions started taking place, leading to the concept being spun off to its own site, 99Designs.

The site allows businesses to post design jobs online, with freelance designers competing with each other to create the best solution and claim the commissioned payment.

“There was just a huge groundswell of interest in the idea so we thought, ‘We’ve got to build a site for this, it’s not right to have it in a forum’,” says Harbottle.

99Designs gradually grew in popularity, sustaining a handful of staff. However, Harbottle faced two initial problems. Firstly, the fee structure needed to be revamped.

“We’ve been profitable since day one (but) we realised at the start that we had a listing fee of $10, then $20 and then $30 and that the designers were making $200 and we were not seeing any of that.”

“We initially didn’t handle payments, but we increased the commission as we added new functionality and features. It then became too complex for customers – they had to pay extra for upgrades and so on, so we introduced a flat package price.”

“There’s now a gold, silver and bronze price. So, the bronze price is $295 and the designer gets $200 and we get $95. With the gold account, you get an account manager to handle your needs.”

Secondly, 99Designs had to deal with a backlash from agencies that felt the site was damaging the design industry.

“We have a disruptive business model, which was a challenge for us,” Harbottle says. “We thought we were doing amazing things, but the high-end design agencies despised us.”

“There was a heated debate about 99Designs harming the design industry but, if anything, it gave us a lot of link-backs! In truth, we had 2,000 making money on the site every day, so we thought we should just focus on them. They were making money they may not have elsewhere.”

“That debate was quietened down a bit now.”

Customer focus

Identifying an emerging customer need may have created 99Designs, but the interaction with users of the site didn’t end there. Harbottle says that customer focus has been integral to 99Designs’ success.

“We have focused on bringing customers to the site, as we figured that designers will look to get there themselves in order to get the money for their work,” he explains. “The designers will jump through hoops to get the work, while the customers need to be convinced.”

“Word-of-mouth is still the biggest driver for us. It often starts with someone talking to their boss about a design, which leads them to us.”

“We are constantly turning to our customers to watch what they do and listen to what they say. Customers come in (to our office) and compare and test everything we are doing.

“The best way to land potential customers is to interact with them and speak about their experiences. We go to a lot of conferences where SMEs are.”

Harbottle advises tech start-ups to give away their product for free in the early stages of development.

“Don’t spend all your time and money developing software and then launching it – that’s guaranteed to be an expensive failure,” he says. “Get customer feedback as early as possible.”

Rapid expansion

Unsurprisingly for a site that has 15 million page views a month, 99Designs rapidly outgrew Australia. In 2009, the site opened an office in the US with nine staff, to complement the 15 developers in Melbourne.

“For all intents and purposes, we are a US business now,” says Harbottle. “But it’s very expensive to hire developers in the US, so there’s no need to move the development team. That kind of offshore solution isn’t uncommon now.”

“I never thought that we’d build something that would grow so much in such a short period of time. I say to people that I’m the co-founder of SitePoint and they say ‘who?’ and then I mention 99Designs and they say, ‘Wow, I love that site.’”

The long-term question hanging over 99Deisgns is whether the current fetish for all things crowd-sourced is a viable, long-term trend or whether sites like Harbottle’s and Freelancer.com, another Australian start-up, are existing in an ephemeral bubble.

“Crowd-sourcing is just a buzz word for something that has happened for a long time,” Harbottle argues. “It seems like a bubble in that some businesses have launched because of that buzz word.”

“It just doesn’t work for some businesses – say, if you asked designers to design you an aircraft for $10,000 for example. Designers create logos for lead generation for other clients, not the $200 to $300 they make on a job.”

“People ask why do they spend all day pitching for those small jobs, but it’s opening up future jobs for themselves. About 90% of design dollars are with freelancers and 10% are with agencies. There’s always that need to secure work for the future.”

Future plans

Harbottle says that 99Designs commands a healthy interest within the venture capital world, saying that he’s regularly sent term sheets from keen investors.

But he’s adamant that he has no plans to sell out or float the business. If anything, he’s keen to increase his workload. True to form, a new venture is forming around a customer insight.

“Learnable.com is the next cab off the rank,” he says. “It’s a site that allows you to buy and sell courses online. It came from tests we ran on SitePoint – the format proved very popular, we ran some experiments and we did it.”

“We always have a lot of approaches, but we have momentum now and we have a bunch of ideas that will keep us going for the next few years. That’s what really excites me.”

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